The Treasury has outlined a plan that could change how personal income tax is withheld for a specific group of taxpayers. It targets those earning around 35,200 euros or less, with a job income that sits in a broader range of personal and family circumstances. The proposal does not promise lower tax bills outright. Instead, it introduces a withholding arrangement designed to reflect planned shifts in regulation when the new law is enacted.
Tax experts note that the impact on this group will be limited. Since many of these taxpayers habitually file returns, the primary effect will be improved liquidity through the year and a smaller payoff when annual liquidation occurs during the following year. Still, there can be instances where withholdings drop too much and a payment becomes necessary, creating a timing difference that will move the tax burden into the annual return filed in spring 2024.
Taxpayers who want more control can ask their employers to apply withholdings they believe are more accurate. The eventual settlement of any difference would occur later, during the annual tax reconciliation.
The draft royal decree aligns withholding with two announced regulatory changes: raising the tax payment threshold from 14,000 euros to 15,000 euros and extending the income reductions to 21,000 euros (up from 18,000). The goal, according to the explanatory memorandum, is to shift the economic impact away from higher discounts toward lower-income workers, so taxpayers do not have to wait to file to benefit from reduced liability.
The adjustment takes place in two ways. First, the thresholds under which withholding occurs are increased. For example, a single person with one child would see the threshold rise from 15,947 euros to 17,270 euros, meaning income that usually falls outside personal income tax would not trigger withholding or a late repayment from the treasury.
Second, the entitlement to withholding relief rises from 22,000 to 35,200 euros, under principles that consider certain personal and family needs. For instance, if a married taxpayer earns less than 1,500 euros on a spouse’s income, these conditions would apply.
The aim of the change is to prevent sharp jumps or sudden increases in take-home pay that could occur when income crosses set limits. As an example, a married taxpayer with two children earning 22,001 euros would see annual withholdings fall to 1,186.57 euros under the new thresholds, compared with 2,303.22 euros under the former rules.
Specifically, the rule places a cap on withholding at 43 percent of the amount of income earned minus a non-wage allowance, with the exact figure varying according to personal and family circumstances. Personal income tax remains a complex system influenced by family status, place of residence, and applicable deductions, making it difficult to predict precisely how much the measure will shift outcomes for any individual taxpayer.